Global CO 2 Emission Reduction Disparities After and Before COVID-19

Resham Thapa-Parajuli (), Rupesh Neupane, Maya Timsina, Bibek Pokharel, Deepa Poudel, Milan Maharjan, Saman Prakash Kc and Suprit Shrestha
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Resham Thapa-Parajuli: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Rupesh Neupane: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Maya Timsina: Center for Public Policy, Governance and Anti-Corruption Studies, Tribhuvan University, Kirtipur 44613, Nepal
Bibek Pokharel: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Deepa Poudel: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Milan Maharjan: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Saman Prakash Kc: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal
Suprit Shrestha: Central Department of Economics, Tribhuvan University, Kirtipur 44613, Nepal

Sustainability, 2025, vol. 17, issue 14, 1-18

Abstract: The relationship between economic progress and environmental quality remains a central focus in global sustainability discourse. This study examines the link between per capita economic growth and CO 2 emissions across 128 countries from 1996 to 2022, controlling for energy consumption, trade volume, and foreign direct investment (FDI) inflows. It also evaluates the role of governance quality—measured by regulatory quality and its volatility—while considering the globalization index as a confounding factor influencing CO 2 emissions. We test the Environmental Kuznets Curve (EKC) hypothesis, which suggests that emissions initially rise with income but decline after reaching a certain economic threshold. Our findings confirm the global presence of the EKC. The analysis further shows that trade openness, governance, and globalization significantly influence FDI inflows, with FDI, in turn, reinforcing institutional quality through improved governance and globalization indicators. However, in countries with weaker governance and regulatory frameworks, FDI tends to promote pollution-intensive industrial growth, lending support to aspects of the Pollution Haven Hypothesis (PHH). We find a significant departure in EKC explained by post-COVID governance and globalization compromises, which induced the environment towards the PHH phenomenon. These results highlight the need for context-specific policy measures that align economic development with environmental constraints.

Keywords: Environmental Kuznets Curve; CO 2 emissions; economic growth (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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